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You should evaluate each subscription or membership service at least once a year to make sure you're not paying for anything you aren't using. That includes your Costco membership -- especially if you have the costlier Executive membership.
For most people, the primary difference between the $120 Executive membership and the $60 Gold Star membership is the Costco Reward. As a Costco Executive member, you earn 2% back on your in-store purchases in the form of an annual Costco Reward (up to $1,000 back).
That Reward certificate is at the heart of the decision whether or not to renew.
Your Costco Reward should pay for the upgrade
Since your 2% back is why you pay twice as much for an Executive membership, that 2% should at least pay for the $60 difference in membership types. In other words, if your annual Reward isn't at least $60, you're probably losing money on the upgrade.
Here's what 2% back looks like at different spending levels:
| Monthly Spend | Annual Spend | Annual 2% Costco Reward |
|---|---|---|
| $50 | $600 | $12 |
| $100 | $1,200 | $24 |
| $150 | $1,800 | $36 |
| $200 | $2,400 | $48 |
| $250 | $3,000 | $60 |
| $300 | $3,600 | $72 |
| $400 | $4,800 | $96 |
| $500 | $6,000 | $120 |
| $750 | $9,000 | $180 |
| $1,000 | $12,000 | $240 |
| $1,500 | $18,000 | $360 |
So, if you spend at least $250 a month shopping in-person at Costco, you probably break even on your Executive upgrade. (And if you spend at least $500 a month at Costco, you're breaking even on your entire membership cost.)
If your annual Costco Reward isn't enough to cover the upgrade cost -- and your spending isn't likely to increase over the next year -- it's time to downgrade back to a Gold Star membership.
You can get a refund if your Reward is low
The nice thing about Costco is that its return policy is tops. This extends even to the membership fees.
For example, if your annual Reward isn't enough to cover the cost of your Executive membership upgrade, Costco will refund you the difference when you downgrade. You do have to downgrade or cancel, however; you can't get the refund and keep your Executive membership.
Here's what Costco's website says about the policy: "To receive a refund for the current Executive upgrade fee, the membership must be canceled or downgraded to a Gold Star or Business Membership. Any 2% Reward issued or accrued will be subtracted from the refund and forfeited to the extent it exceeds the amount of any refund."
Your Costco membership should pay for itself
So far, I've been focusing on whether you should keep your Executive membership versus downgrade to a Gold Star membership. But I want to stress that those are not the only options: You can also cancel your membership altogether.
Your Costco membership should pay for itself in savings. If you're not saving at least $60 a year through lower prices, why are you paying Costco just to get through the door? Cancel your membership and put your $60 to better use.
As noted above, Costco's generous refund policy extends to memberships. So if you realize you're not happy with your Costco membership, you can get it refunded at any Costco location. (Just keep in mind that this can make it difficult to return previously purchased items.)
A Costco membership can be good for your budget, but that's hardly a guarantee. And that's extra true when it comes to an Executive membership upgrade. Make sure you're getting your money's worth before you decide to renew this year.
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We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Brittney Myers has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.
